Annuities

Annuities

In my nearly 15 years of experience as an insurance advisor, I have met with hundreds of singles and couples. I have found that the retirement planning product that is the most confusing, complicated, least understood, and the most falsely represented by financial advisors, insurance professionals, and others is annuities.

One incorrect perception of annuities is that even though there are many different types of annuities, they are often lumped into one product or type. This couldn’t be further from the truth. Even though all annuities are sold by insurance companies, that is the only universal truth about them. They are as different as apples and oranges. Annuities come in many types: variable, fixed, fixed index, SPIA’s, and more. Some of these annuities are designed for lifetime income—many are not.

Even though many annuities are sold as safe savings or investment products with no change of losses, many of those annuities are subject to stock market losses and risk to the principal, no matter what the salesperson may have claimed or said.

Even though most fees are undisclosed by many who sell them, many annuities do carry fees of up to 4% or more annually.

Some annuities are purchased from individuals who make outlandish claims of high bonuses of 20% or more and guarantees of 6%, 7%, and more per year, regardless of stock market performance. Sadly, people who buy these annuities later learn that neither the large bonus nor high annual growth guarantees are actually guarantees to their money. Rather, they are guarantees to an account that has no cash value.

Similarly, some annuities are purchased based on anticipated growth that may be exaggerated by the sales person.

It’s no wonder why there is so much confusion and dislike surrounding annuities. So, how do you get the straight scoop about annuities and how do you know what type of annuity might be right for you…without the sales hype, misinformation, or misrepresentation?

The answer is simple. Come see Boyd Casselman. Schedule a no-hype, no-pressure, no-cost appointment and start getting educated. Boyd will take the time to understand your pain, concerns, needs, and goals, and he will work to put together a customized plan for you. Boyd will educate you about why his recommended products and strategies really work. You will not be “sold” a product or told what to do, but rather you will be empowered with truthful, straight-forward and valuable information. You will be able to make wise and informed decisions about how to best navigate your retirement years safely.

Purchasing the right annuity with the right amount of money at the right time for the right reasons, as part of an overall retirement and income plan, can be the difference between a comfortable retirement and one with unforeseen or unexpected negative financial consequences. Making the right financial decisions now will be critical and ensure you never run out of the money you need for the rest of your life.

Types of Annuities

What are some of the most common types of annuities sold to and purchased by those preparing for and in retirement?

Note: With any annuity purchase, it is important to get full and accurate information about how an annuity works including risk, fees, income, guarantees, liquidity and withdrawal rules before making any annuity purchase.

SPIA or Single Premium Immediate Annuities

SPIA’s are a unique type of fixed annuity that offers a level payment over a lifetime and/or a specified period of time—with or without a guarantee of full payment of the entire premium paid into the annuity. When purchased, the contract owner trades the premium paid to the insurance company for the promised annuity payments, thus relinquishing the funds paid to the insurance company. Lifetime SPIA’s are an older and outdated form of creating income and are currently rarely used as an income source. However, a more likely use of an SPIA is to create lifetime premium payments to a guaranteed life insurance policy, thus ensuring the insurance company guaranteed lifetime premium payments. Consequently, SPIA’s can be a powerful tool to maximize the life insurance death benefits.

Variable Annuities

Variable annuities are sold by those who hold securities licenses. The funds inside a variable annuity are typically invested in securities—stocks, bonds, mutual funds, etc. Fees are usually pretty high and not always disclosed. Guarantees within the annuity are sometimes misrepresented, as those guarantees are associated with a non-cash, lifetime, or living benefit account, rather than on your actual money. Also, as with most annuities, only 5% to 10% of the account value is available as an annual penalty-free withdrawal during the surrender period.

Fixed Annuities or MYGA’s—Multi-Year Guaranteed Annuities

A fixed annuity or MYGA is an annuity that typically pays a predetermined interest rate over a specified term, such as 3, 5, or 7 years. Many consider MYGA’s an alternative to CD’s at a bank or credit union, and many times a MYGA pays higher interest rates than a CD. Access to the funds during the MYGA term varies from no access to interest only withdrawals to 10% per year liquidity.

Fixed Index Annuities

Fixed index annuities are the most common form of fixed or “safe” annuities and are purchased by those who have limited or no risk tolerance. The annuity funds are not subject to stock market risk or losses, but the annuity still pays interest by way of the performance of a stock market or other index. Of course, since the fixed index annuity is protected from market losses, on the flip side, growth is limited to a portion of the positive performance of an index. In other words, when the stock and/or bond market goes down, the annuity funds stay unchanged, but when markets go up, a portion of that growth is paid as interest to the annuity’s account value. Fixed index annuities are purchased for capital preservation and modest growth—typically an average of 3% to 6% annually, and in some cases, for single or joint lifetime income. Different from a SPIA, those fixed index annuities that offer lifetime income allow the annuity contract owner to retain the account value while taking income rather than “trading” the cash paid to the insurance company for that income. As with other annuities, most fixed index annuities will charge a modest annual fee for the guaranteed of lifetime income.

Lifetime Income

While working with prospective clients, Boyd Casselman has asked the following question hundreds of times: “What do you worry about most in retirement?” 

Whether an individual is preparing for, entering, or already living in retirement, nearly 100% of the time the answer is “running out of money” or “outliving my money.” 

So, what should you do if you are worried about running out of money before you run out of life? Meet with Boyd Casselman.

Over the past 15 years, Boyd has helped his clients not only keep their retirement assets growing in a safe environment, but he also lays out a simple, yet powerful plan that ensures his clients will always have the ever-increasing lifetime income they will need. Boyd’s custom-made plans detail, in a very clear format, how to navigate the retirement years without running out of money or outliving their assets. The end result? His clients receive the financial assurance and peace of mind so needed at this stage of their lives.

If you meet with Boyd, his unique, valuable income planning tool is available at no charge or obligation to you. So, are you worried about the safety of your money? Are you worried about having enough money to last you for the rest of your life? Schedule a time to meet with Boyd at either his South Jordan or Layton office, and start the process of creating your own customized plan so that you, too, can find greater peace of mind as you move into and through your retirement years.